Dell's losses widen in first post-EMC quarter, but nobody's worried

Servers soar, PCs pop, debt drops and all agree 'reasonable progress' has been made

Dell Technologies has posted its first set of quarterly results and declared “reasonable progress” has been made towards integrating EMC and Dell.

The combined companies generated consolidated revenue of US$17.8 billion, but made an operating loss of $1.5bn.

Aside from integration hassles like being unable to issue invoices, the company says its biggest current problem is component costs for memory and solid state disks. It's already quoted some customers for kit, only to see component costs move so fast that promised prices become an unwelcome obligation.

Dell Technologies fiscal first quarter 2018 results

Three Months Ended

May 5, 2017

April 29, 2016


(in millions, except percentages; unaudited)

Net revenue

$                         17,816

$                         12,241

46 %

Operating loss

$                         (1,500)

$                            (139)


Net loss from continuing operations

$                         (1,383)

$                            (424)


Non-GAAP net revenue

$                         18,171

$                         12,319

48 %

Non-GAAP operating income

$                           1,197

$                              539

122 %

Non-GAAP net income from continuing operations

$                              581

$                              264

120 %

Adjusted EBITDA

$                           1,567

$                              643

144 %

Component costs are also an issue because hardware is otherwise doing well. The Infrastructure Solutions Group, which combines Dell's storage, servers and networking business with EMC, brought in $6.9bn, of which $3.2 billion was in servers and networking and $3.7 billion in storage. Operating income for the Group was $323 million.

Demand for Dell's many hyperconverged offerings “grew at a triple-digit rate, while demand for all-flash solutions grew at a very high double-digit rate”. Demand for the Virtustream cloud increased “by approximately 100 percent.”

Mid-tier storage sales disappointed, but the company thinks its recently-refreshed product lines and some channel and sales re-orgs ought to turn that around.

PCs did very well, with the company's Client Solutions business posting $9.1bn of revenue, up six per cent year on year. Business and consumer buyers both rebounded, by three per cent and 12 per cent respectively. Operating income, however, declined thanks to those pesky component price problems.

Interestingly, the company decided to let treasurer Tyler Johnson speak before Dell EMC boss David Goulden, meaning discussion of debt came before results for product groups. Johnson revealed that the company has already paid down $7.1bn of debt since the EMC merger completed, but it's still got $50.7bn to service. Some of that is nice debt to have as it is tied to Dell Financial Services, but Johnson concluded by saying, “We continue to prioritize deleveraging and optimizing the balance sheet to a profitable growth and strong cash flow generation.”

$50bn of debt will do that to a company.

Over all, the tone of the call was very much that this quarter represents the beginning of the beginning, as integration between Dell and EMC has scarcely begun.

CFO Tom Sweet wrapped things up, saying the company expects "improvement over the course of the year as we refine the alignment of our sales force and our go-to-market changes mature and as we improve storage velocity.” ®

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